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Wednesday, 23 February 2011
Page: 1223


Ms O’DWYER (6:03 PM) —We have had some very eloquent speeches in this chamber as a result of the condolence motion—stories about the devastation in Queensland and Victoria. We have heard about the courage and hope of the people who are set to rebuild their lives after suffering much tragedy and devastation. We in the coalition believe very strongly in supporting the rebuilding effort. Make no mistake about that. How it should be funded is the central issue in this debate on the Tax Laws Amendment (Temporary Flood Reconstruction Levy) Bill 2011 and the Income Tax Rates Amendment (Temporary Flood Reconstruction Levy) Bill 2011.

I am a member of the House of Representatives Standing Committee on Economics, which recently conducted an inquiry into this new tax. The coalition members’ dissenting report of that inquiry outlines the reasons for opposing this new tax in full. Today, in the limited time that is available, I want to focus on the overarching issue, the fact that this new tax goes to the economic credibility of this government, which is why it must be opposed.

Why is there a need to bring in this new tax? Throughout Australia’s history the federal government has not deemed it necessary to impose a new tax to deal with natural disasters. Whether it was the Victorian bushfires of 2008-09, Cyclone Larry in 2006, the Ash Wednesday fires of 1983, Cyclone Tracy in 1974 or the Brisbane floods of 1974, the government did not seek to impose a further tax burden on the people. Instead, the money came from consolidated revenue—money that has already been collected in taxes by the government from you and me and businesses. Not even Gough Whitlam, the most profligate of Australian prime ministers in terms of government spending, suggested that a new tax be imposed on the Australian people to deal with the effects of Cyclone Tracy. Not even Gough Whitlam, whose reputation for waste and inefficient programs is surpassed only by this current government, felt the need to bring in a former Liberal minister to provide credibility to a government package.

This tax sets a poor precedent for the way in which governments go about funding unforeseen events. Instead of planning for the future and ensuring that the government has enough resources to deal with emergency situations when they arise, the government is creating a bias against proper and prudent planning and compromising the nation’s emergency response capability. If it needs to impose this tax, there is clearly a much bigger problem that needs to be rectified. But, rather than look at this, the government accuses any opponents of this tax of being hard-hearted and lacking compassion for the victims of these terrible tragedies. For that suggestion, they should hang their heads in shame.

In the Prime Minister’s National Press Club address she said:

… sound budget principals say we should pay as we go …

But, Prime Minister, Australians are already paying as they go. Australians are already paying taxes that, since Federation, have been designed to deal with floods and fires and other emergencies. This new flood tax has no precedent in our history. It is a new disaster tax. With this new disaster tax Australians will be paying even more for the government’s waste and inability to manage the budget.

This new tax might be a more credible proposition if the government had not shown a propensity to waste taxpayers’ money on programs, such as the pink batts program and the school halls program, that have failed miserably in providing value for money. The pink batts fiasco was a policy failure with devastating consequences—not only the loss of homes through 94 associated house fires but, significantly and very tragically, the terrible loss of four young lives. This was a policy with a cost blow-out of $1 billion, and the cost of fixing it will be an extra $500 million. The government could have provided the funds for reconstruction had it simply not embarked on this program in the first place.

Just recently we have heard from the Orgill report that public schools in Victoria, New South Wales and Queensland were paying much more for their school halls than independent schools were. In aggregate, they paid $1.5 billion more, despite no differences in the quality of the projects. When compared to the independent school sector as a whole, the waste grows to $2.6 billion. This paints a very bad picture of the government’s ability to deliver a government program. It is clear that, if the government had not wasted taxpayers’ money in this manner, there would be no need for the government to compel taxpayers for even more money. It is no wonder they have now called in John Fahey, former Liberal Minister for Finance. I do note that they have neglected to call in Lindsay Tanner, Paul Keating or Ralph Willis.

There is room in the budget to cut at least $1.8 billion of further expenditure—the $1.8 billion that this government says it needs. The coalition has offered to help the government find these savings. Indeed, the Leader of the Opposition said he would sit down with the Prime Minister to find these savings. On having that offer rejected, we set about providing a comprehensive list of over $2 billion of savings on our own. This brings me to my next point: the mirage of Labor government savings. It appears on the horizon in the economic desert as though it were real yet, as soon as you get close, it disappears. The government made much of its announced $2.8 billion in savings, which included some cuts and deferrals. It was, of course, a fig leaf for this new disaster tax. Where are these cuts now? Like the mirage, they are fast disappearing.

As of today, the government has reversed $364 million of announced expenditure cuts to the Solar Flagships program and the National Rental Affordability Scheme to—you guessed it—buy off the Greens. Nothing should get in the way of the Greens-Labor marriage. What is $364 million between partners? What was the price of the support of the member for Denison? Fifty million dollars. The reversal of expenditure cuts for the Australian learning and teaching fund secured the support of the member for Denison.

Having gone back on these expenditure cuts, the government is in no hurry to let us know what additional cuts will be made to make up the shortfall. The government needs to guarantee that it will not seek to increase the levy nor extend it to try to make up the difference. I fear that, even if the government were to guarantee it, even if it were to make a promise, if history is any guide the promise will not mean much. We only need to look at the Prime Minister’s promise before the last election not to introduce a carbon tax, not to impose it on the Australian people. Yet, already it is not a matter of whether she will bring it in but when.

So who is actually going to pay for this tax? According to the Prime Minister and the President of the ACTU, Ged Kearney, it will be borne by wealthy Australians, who can afford to pay more. During the inquiry of the House Standing Committee on Economics into the flood tax, the President of the ACTU said that she supported the tax because people on low incomes would be exempted. But, of course, she then admitted, after further questioning, that the threshold for the tax of $50,000 was below the average wage of around $65,000 a year—not the median wage but the average wage. She also said that the tax would affect around half of the workers that she represents. This tax will go directly to the cost of living for average Australians, who are already battling higher food prices, higher electricity prices and higher interest rates.

There is no economic argument in favour of a new tax. Economic expert Mr Saul Eslake provided very strong evidence to the recent inquiry into this tax. He said that the introduction of a new flood tax was one of ‘political choices rather than economic imperatives’. According to the evidence presented, the weight of economic opinion was that it would be highly undesirable to fund disaster reconstruction and relief with new taxes as a matter of both principle and precedent. Mr Eslake went on to say:

… if you continue to increase marginal rates of tax on a segment of the population by large amounts or with high regularity over time then there could well be some adverse consequences for incentives to work, save, invest and the like, which have been well documented in the economics literature.

Professor McKibbin, a senior economist and member of the RBA board, said in his evidence:

Most economists who study public finance would support the view that taxation is not the optimum way to finance the reconstruction of infrastructure after a natural disaster. The argument has a long tradition in economics.

I leave the final word to Professor McKibbin, who also said:

My view is that we should always, where possible, establish good principles for economic management because when the big decisions have to be made we have a framework in which to act, whereas if we continue to do what we have always done then we end up becoming a banana republic. We have to be very careful that all decisions, even the small ones, are done in the appropriate way.

This is why the coalition cannot support this flood tax; this is why we cannot create a new precedent; and this is why I will be opposing it.